All Downhill From Here: Is My Business Showing Signs of Impending Failure?
So you’ve started afresh in a new bar or restaurant, but something doesn’t seem quite right. Formed through previous experiences your service industry spidey senses are tingling, telling you that something is wrong.
In order to fix a problem, you first need to identify the problem. Here are a few of the signs that appear before disaster strikes. We discuss how to spot them and what you can do to put your business back on the rails toward success.
Lack of Interest
This is a major red flag. One of the main corner stones of our industry is quality of service and if your employees don’t care then the quality of your service will begin to falter. This can be highly detrimental for your business.
A lack of interest doesn’t just affect the customer service aspect of your business but will also include a drop in standards all over your location, including things like cleanliness and organisation.
A lack of interest from the staff stems from upper management. If the owners and managers are not showing a passion and are not working hard for their business then the staff will follow suit. You need to work alongside your staff to motivate them. No task should be too low for a manager, whether it be cleaning toilets or washing dishes. If your employees see you digging in wherever is needed they will respect you more and will then be more inclined to work harder for you.
Explain to your staff the importance of the tasks you have them do. Some tasks might seem trivial, but once people understand why they’re doing something they are more likely to be happy to do it, and do it well.
Happy staff means happy customers, and enthusiastic, proud and happy management and owners means happy and proud staff. It’s a domino effect. Enjoy what you do and buoy your staff along with you! Your attitude can have a remarkable effect on your business.
Failure to Understand Your Immediate Market
Know your clientele and cater to their needs first. Where is your bar located? Are you in the centre of town surrounded by businesses? Then your lunch menu should cater to a business lunch crowd; quick to produce yet good food. Adjust your happy hour to fall at the end of the working day. Use whatever methods you can to draw in those in close proximity.
If you find that you’re selling more drinks and less food than you expected then adjust your business to work toward this drinking crowd. They’re the ones keeping your doors open. Adapt to what comes at you. Everything isn’t going to work as you planned so be ready to adapt.
Lack of Financial management
In the service industry we sell products. Not as whole items in boxes but in small and ever varying portions of the quantities we buy them in. Therefore, you need to keep a close eye on what is being sold. Businesses might make money but here you deal in pennies on a day to day basis, and every single cent makes a difference.
This is the importance of keeping an accurate inventory as well as accurate record your sales. If you do this you can see where money is coming in and where money is going out and identify any grey areas.
However, financial management doesn’t just pertain to your product and inventory. Financial manament means keeping track of everything money related: bills, invoices, paycheques etc. Keeping a through record of your checks and balances is crucial to the financial success of your business.
Undercapitalisation
This is mainly relevant for businesses that have just opened their doors, however, that doesn’t mean that it cannot apply to businesses that have been afloat for over ten years.
Undercapitalisation = A company with insufficient capital to achieve the desired results.
In the case of our industry that is avoided by the continuous flow of customers and capital through the business in order to pay bills, buy product and fix anything that breaks.
Opening a restaurant or a bar is a big gamble and you need to be prepared not to have any cash flow -i.e. customers- for at least six months, ideally, you should prepare for a year of poor cash flow. This means that you need to make sure that you have money in the bank to pay your staff, the bills, the rent and to buy product for an extended period of time without a good cash flow. It also means you need to have extra capital on hand for when something breaks and needs to be fixed or replaced.
If you don’t have the extra capital on hand then you’ll find that the only alternative will be to close your doors and thus your source of income.
Lack of Upkeep
Are things not being fixed? One of the ovens has been out of commission for a while. A sink has been leaking long enough to stain the floor. These are sure signs that your business is not receiving the love and attention it needs. Also, watch out for the cutting of quality. Swapping out brand name liquor for cheaper alternatives is one way to tell that a location is struggling. If portion sizes have gotten smaller yet prices have remained the same then you know something is up.
All of these things point toward cutting costs to make bigger margins and all this points at a business in financial jeopardy. Review the points above, it is likely that one of these is the root of the problem.
Alternatively, get creative not tight! Swap out under performing items on your cocktail menu for ones with a lower CoS (Cost of Sales). Instead of using a lower quality cut of meat think of replacing the dish entirely, maybe with something that uses the new, cheaper cut, or something that uses less meat and more vegetables.
